As the cliché goes, whenever the US sneezes, the world catches a cold. This is evident from the way The  financial  crisis  in the United  States  has  weakened  the economies  of  many  nations.  Investment banks are  falling. Unemployment is rising.

Inflation is getting worse.  Poverty is expanding.  These are obvious indicators of an impending or an already arrived…  Global economic recession.

A recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year.  It is also preceded by several quarters of slowing down. An economy high grows over a period of time, tends to slow down the growth as a part of the normal economic cycle.

A recession normally takes place when consumers lose confidence in the growth of the economy and spend less.  This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment. Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment.

Economists and other commentators are comparing the present economic downturn to the Great Depression of the 1930s. The similarities are difficult  to  ignore:  bank failures,   a  stock  market  crash,  soaring  unemployment   and homelessness,  and  the  fact that in both periods,  it  was  the decline  of the U.S. economy that triggered the  global  economic crisis.

China exports, mostly to Europe, United States and Japan. If these countries are in a serious recession bordering depression, how can China escape its consequences?At the time when the crisis was just beginning to unfold, optimists pointed to Asia as the shock absorber that would buffer the global downturn. A decoupled Asia, it was argued, would through its own growth and the demands that it would make on the world’s output ensure that the financial crisis that was largely a phenomenon restricted to the developed countries would not have as damaging an effect on global growth as the pessimists, then in a minority, were predicting.

In fact, fear of a long recession stems not just from the distressing developed country figures. It is also triggered by evidence that the recessionary trend is affecting developing economies in Asia, which as a group grew at 10.6 per cent and 7.8 per cent in 2007 and 2008, are now expected to grow at just 5.5 per cent or 1.6 percentage points lower than projected as recently as November last year.

China, India and Vietnam, which had seen their stock markets outperforming their global “competitors”, also recorded the steepest falls. The outflow of capital put pressure on many currencies, forcing central banks to unwind a part of their reserves. A liquidity and credit contraction ensued.

The whole of Asia would be hit by a recession as it depends on the US economy. Asia is yet to totally decouple itself (or be independent) from the rest of the world, say experts. Given such integration, it is not surprising that an Asia that was experiencing robust growth till recently has been affected quite adversely by the global financial and economic crisis.